Helping Alabama Businesses Build Career Paths and Boost Local Economies

Our own impact investing journey began with a challenge from foundation leadership in 2017 to partner with Alabama Power’s economic development team and develop charitable strategies that expand the pipelines workforce in the technology sector. This initial challenge sparked a transformational initiative to align the foundation’s social impact goals with core public service insights into community needs, economic development and local leadership.

Hallie Bradley is the Strategic Initiatives Manager for the Alabama Power Foundation. (case)

In 2018, the foundation’s board approved efforts to align a portion of the foundation’s grants with social impact investing. An internal advisory committee representing the company’s key partners has been formalized to help source projects, provide due diligence and develop procedures for the new impact investing program.

Leveraging the company’s local connections and economic development expertise to source projects, we rolled out our first impact investment in April 2019. The foundation provided a loan to a health technology company based in Birmingham to support the development of a behavioral coaching program to reduce opioid dependence and addiction. The Program-Related Investing (PRI) is the result of more than a year of work to align social impact businesses with core business strengths, develop a pipeline to identify investment opportunities, and advising the foundation board on the value and desirability of impact investing. It was the first of six PRIs created by the foundation in 2019, with guidance from Rockefeller Philanthropy Advisors.

To date, the foundation has invested $5 million in more than a dozen companies and projects, ranging from providing low-cost or no-cost loans, to guaranteeing a non-profit loan. profit, through venture capital investments. Among the impact investments in the foundation’s portfolio are:

  • Ease the development of a prospectus for a hyperlocal Opportunity Zone fund with below-market debt that includes an equity option if the fund is capitalized.
  • Providing $500,000 in loan guarantees so cash-strapped municipalities can acquire personal protective equipment during the pandemic and receive reimbursement from the CARES Act.
  • More PRI to support the growth and learning of technology companies, as well as nonprofit investment projects.

Go beyond financial capital to build an investment pipeline

As we continued to learn, we recognized the value of charitable societies and incentives for social innovation and entrepreneurship to advance our goals. B Corps – companies certified by B Lab as meeting verified social and environmental impact standards – and for-profit corporations are a relatively new corporate structure that requires companies to report on social and environmental impacts by more financial data.

Research from the University of Alabama, supported by the foundation, has shown that minority and women-owned businesses are strong candidates to become for-profit corporations. After state legislators opened the door to benefit corporations in Alabama, the foundation worked with partners to establish the Alabama Benefit Corporation Association (ABCA) as a resource for entrepreneurs to network and to obtain technical assistance. To date, the ABCA has supported over 600 small business owners, investors and others interested in for-profit corporations. After all, businesses don’t grow in a vacuum.

Allison Swagler is a former charitable giving specialist at the Alabama Power Foundation. (case)

Why do we invest in for-profit companies? We hope that incubating for-profit companies will lead to a pipeline of companies in which we can make impact investments.

For example, two years ago, a fast-growing Birmingham-based software development company was preparing to set up its ed-tech subsidiary, CAVU, which aims to teach people from underrepresented communities how to use Agile, Scrum and other platforms, offering certificate-holders new career paths while providing businesses with access to a skilled and diverse workforce. Given the social impact of the work, CAVU founder Chris Sims was considering whether to turn it into a non-profit organization when another option presented itself: the for-profit corporation and the B Body structures. Sims and his team shifted gears, and in 2021, CAVU became one of the premier charitable corporations in Alabama, consistent with their goal of using business as a force for good.

“Launching CAVU as a for-profit company offered the best of both worlds: a for-profit entity with a clear mission to do good in the world,” Sims said. “We never want a desire to make a profit to overshadow our desire to support the community.”

With a growth-oriented business plan and defined community impact, CAVU seemed to qualify for a foundation impact investment. After performing due diligence, we established a PRI in the form of a convertible note. The funding will help expand CAVU’s scholarship program to reach more students, while the foundation retains the option to convert the loan into equity in the company at a later date.

Share best practices for building the pitch

Today, the Alabama Power Foundation’s impact investing team is opening its impact investing pipeline to local peers and new national partners, in some cases to guide other funders make their first impact investments. We take what we have learned on our journey and, by sharing our knowledge, attract more investment to our state.

For example, we hosted several meetings of peers in the field of philanthropy to share access to our deal pipeline. When partners decide to co-invest, we provide our knowledge and models, such as legal documents and due diligence, so they don’t have to start from scratch.

Our foundation strives to expand co-investment opportunities and grow Alabama’s impact investing network, both by building within our organization and attracting outside thought leaders. We strive to educate and engage Alabama stakeholders on the benefits of cultivating an impact investing market through incentives for social innovation and social entrepreneurship. We build networks between agencies, nonprofits, for-profit organizations, and the communities we serve to bring resources to bear in new ways that meet local needs with sustainable solutions.

There are exciting opportunities for other foundations and impact investors with a mission to address racial equity, education, and economic opportunity to participate and invest in our state’s bright future. We invite you to join us.

This article was written by Hallie Bradley, head of strategic initiatives at the Alabama Power Foundation, and Allison Swagler, formerly charitable giving specialist at the foundation. The article originally appeared in Philanthropy News Digest online.

Comments are closed.